Fredriksen: Tankers Will be the First to Recover [UPDATED]

Front Shanghai. Image: Frontline Tankers

By Mikael Holter and Isaac Arnsdorf

Jan. 25 (Bloomberg) — The market for oil and fuel tankers will be the first to recover from a glut in the shipping industry, reviving over the next 15 to 20 months as international trade picks up, billionaire John Fredriksen said.

The shipping magnate, who controls a fleet of oil, bulk and gas carriers through publicly listed companies such as Frontline Ltd., Golden Ocean Group Ltd. and Golar LNG Ltd., said in an interview in the Norwegian capital yesterday that he favored oil product tankers over the biggest crude carriers, for which demand would take more time to rebuild.

“The tank market will recover first,” he said in an interview. “I believe most in the products side, not the big ships. Those will take much more time.”

Read: John Fredriksen – The Man, The Myth, The Legend

Daily earnings for Medium-Range product tankers will rise 11 percent to average $14,375 this year, according to the median of six analyst estimates compiled by Bloomberg. Rates in the trade route to the U.S. from Europe are 34 percent higher than a year ago, according to the Baltic Exchange, the London-based publisher of shipping costs.

Demand to ship refined fuels will rise 4.6 percent this year, while the fleet grows 2.8 percent, Clarkson Plc, the world’s largest shipbroker, estimates. By contrast, capacity on crude tankers and dry-bulk carriers will outpace demand growth, the shipbroker’s figures show.

‘Big Thing’

Fredriksen will continue to invest in shipping, the industry that helped him build up his fortune, he said.
“Shipping is the big thing now,” he said after having lunch yesterday at the Onda restaurant on Oslo’s waterfront.

With an estimated net worth of $13.8 billion, the Norway- born Cypriot ranks as the world’s 68th richest person, according to Bloomberg Billionaires.

Fredriksen split his tanker operator in 2011 to avoid running out of cash amid slumping freight rates. The spinoff company, Frontline 2012 Ltd., bought 24 contracts for new tankers for $578 million last May as it seeks to become the market leader within three years, the Hamilton, Bermuda-based company said at the time. This month it ordered four Capesize vessels and may buy as many as 14, according to TradeWinds, an industry newspaper.

Gas Believer

Golar LNG, which has 13 ships, is investing $2.7 billion to double its fleet with vessels set for delivery starting this year. Fredriksen said yesterday that Golar will continue strengthening its fleet, and probably buy half of the ships coming to the market in 2015 and 2016.
“We believe strongly in gas,” he said.

Fredriksen also controls Seadrill Ltd., which he founded in 2005 and now has 101 billion-krone ($18.3 billion) market capitalization. Rig rates will stay little changed, he said. Rates on drill ships, which operate in deep waters, averaged $455,568 last year, up from $428,337 in 2011, according to data compiled by Bloomberg.

“I think they will stay still for a while,” he said. “But they’re good enough as they are.”

Seadrill shares slid 0.4 percent to 215 kroner as of 12:45 p.m. in Oslo. Frontline 2012 rose 2.6 percent to 39 kroner. Golden Ocean gained 0.4 percent to 5.38 kroner.